The Impact of Trade and Investment Liberalization on Rural Manufacturing

Rural areas in the United States, like in other OECD countries, rely heavily on manufacturing as a source of income. Taking stock of previous studies on the impact of trade and FDI liberalization on manufacturing industries, this study presents a model with heterogeneous firms in the context of a country consisting of an urban and a rural regions. We examine how a manufacturing industry responds differently in the urban and the rural regions when the domestic economy becomes open to trade and investment with a foreign partner.